Fragile financial markets are grappling with wild swings in world oil prices, unnerved by uncertainty over global supplies and the demand outlook from China.
By the close of business on Monday, the price had shot up 27 percent in just three days for the US benchmark contract, West Texas Intermediate for October delivery, rebounding from six-and-a-half-year lows.
However, they skidded again on Tuesday, when weak Chinese manufacturing data cemented concerns over demand from the world’s biggest commodities consumer.
Later in the week, oil prices got a boost from the European Central Bank, which on Thursday held out the prospect of yet more stimulus for the eurozone economies if needed. By the end of the week, crude oil prices were trading in London on Friday evening barely changed.
Brent North Sea crude sold at US$49.95 a barrel — down from US$50.17 a week earlier. The WTI contract traded at US$46.22, up from US$45.22.
Crude oil, the world economy’s most important raw material, has about halved in price in a year. “The fall in commodity prices has looked particularly dramatic because it has included oil,” said Julian Jessop, chief global economist and head of commodities at London-based research group Capital Economics.
While many raw materials have been declining in price since 2011 as China’s booming economy began to slow, oil prices had been propped up by a perceived threat to supply after the Arab Spring, Jessop said in an interview.
“Once the concerns about the potential threat to supply from the Arab Spring disappeared and were replaced by the reality of massive oversupply because of the shale revolution in the United States and OPEC’s response of keeping production high when people had thought it might cut, then oil tanked,” the analyst said.
Keeping pressure on oil prices, Iraq has managed to boost production this year by 1.5 million barrels per day, despite the conflict with extremists including Islamic State militants, and Iran is set to raise exports as sanctions are lifted after an agreement was reached over its nuclear program.
GOLD: Despite the uncertainty on commodity markets, the price of gold — a safe haven — lost its shine over the past week, hurt by a rally in the US dollar.
Gold headed for a second weekly decline as the dollar strengthened and the European Central Bank (ECB) signaled it may increase economic stimulus. Prices were little changed on Friday before the US jobs report.
Bullion for immediate delivery slid 0.8 percent this week. On Thursday, ECB President Mario Draghi said the central bank will allow officials to buy higher proportions of each eurozone member’s debt, sending the shared currency to a two-week low against the dollar.
The direction of the dollar and the US economy have dominated moves in gold, with the metal down 5 percent this year as the US Federal Reserve debated when to raise interest rates. The US employment report may show that more than 200,000 jobs were added last month and is the last major data point before the Fed’s meeting on Sept. 16-17.
“It’s a big day for data,” London-based Mitsubishi Corp precious metals strategist Jonathan Butler said by telephone. “Gold had a leg down on Draghi’s comments yesterday, but all eyes are now on the US.”
Metal for immediate delivery was almost unchanged at US$1,124.63 an ounce at 11:03am in London, according to Bloomberg generic pricing. Futures for December fell less than 0.1 percent to US$1,123.90 on the Comex in New York. Volume was about half the 100-day average for the time of day.
Silver for immediate delivery slipped 0.2 percent to US$14.6946 an ounce. It is up 0.6 percent this week and set for the fifth weekly gain in six. Platinum fell 0.1 percent to US$1,005.95 an ounce. Palladium increased 0.9 percent to US$579.55 an ounce, paring a third weekly drop.
BASE METALS: Copper climbed to the highest in three weeks, accompanying gains in all base metals except tin, as a rebound in world stock markets eased concerns that demand for raw materials will weaken.
European stocks and US equity futures rose, while the recently volatile markets in China, the biggest metals consumer, were closed for a military parade in Beijing marking the 70th anniversary of the end of World War II.
Copper climbed as much as 2.5 percent to US$5,249 a tonne, the highest since Aug. 13, and was up 2.4 percent at US$5,241 by 1:27pm on the London Metal Exchange. Futures for December delivery rose 2.2 percent to US$2.38 a pound on the Comex in New York.
On the LME, aluminum, lead, nickel and zinc all gained. Tin fell 0.2 percent.
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